EconomicEconomic ImpactImpact AssessmentAssessment ExecutiveExecutive SummarySummary January, 2007

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe OwenOwen´´ss DreamDream Albert K. Owen, a young civil engineer, was assigned to contribute in the technical studies for the construction of a railroad that would run from El Paso, , to City.

In 1872, when Owen saw the Topolobampo Bay in exclaimed that “IN THE FUTURE TOPOLOBAMPO WOULD UNITE ALL THE FERROUS AND MARITIME ZONES OF NORTH AMERICA, OF AUSTRALIA AND ASIA”

He conceived the idea of a railroad that would run from Kansas City, would clear Missouri and Texas, would cross the “” until arrive to Topolobampo, shortening 600 miles the distance of a gigantic agricultural market of the United States and opening the door, the most direct, toward the countries of Oceania and Asia.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. MacroeconomicMacroeconomic Opportunity:Opportunity: SaturationSaturation ofof LosLos AngelesAngeles andand LongLong BeachBeach PortsPorts

• 90% of traffic arrives from Asia. •14 million containers per year. •171 million tons in container. •$250,000 million dollars. •28% of the movement of all the ports of the United States. •Fifth Harbor Complex of the World. 16,000,000 14,000,000

•10% Average Annual Growth. 12,000,000

10,000,000

8,000,000 LONG BEACH LOS ANGELES

6,000,000 Sources: Web pages of the ports: 4,000,000 www.polb.com 2,000,000 www.portoflosangeles.org 0 2001 2002 2003 2004 2005

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe saturationsaturation ofof thethe portsports ofof thethe PacificPacific CoastCoast inin USAUSA representrepresent anan opportunityopportunity forfor Mexico.Mexico.

Delays from 6 to 21 days… no improvements expected.

It is estimated for 2010 the oversaturation of the ports of Los Angeles and Long Beach. Source: Poder y Negocios, January 17, 2006

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. InterestInterest ofof AsiansAsians inin MexicanMexican portsports

“China and Japan are interested in developing Mexican ports to avoid delays in Long Beach and Los Angeles”…

Poder y Negocios January 17, 2006

March 7, 2005 ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. CongestionCongestion ofof TheThe PanamaPanama CanalCanal

12,500 ships in 2005 300 million tons CP/SUAB1 Capacity of 330-340 million tons CP/SUAB1 In the 2005 operated at 85% of its capacity The PCA2 estimates that it will reach 100% of its capacity between 2009 and 2011. Investment project of 5.2 billion dollars in 8 years.

Source: www.pancanal.com 1. CP/SUAB signifies Universal System of Capacity of Ships of the Panama Canal, that is the unit of measure in tons of load that travel for the Panama Canal. The ton CP/SUAB serves of unit to determine the tolls and measures the volumetric capacity of load (instead of be a measure in base to the weight). A unit CP/SUAB

equals approximately to 100 cubic feet of space of load. 2. Panama Canal Authority (PCA)

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ¿WhoWho isis alreadyalready takingtaking advantageadvantage ofof thisthis opportunityopportunity? Manzanillo, Col. (with exit by Nuevo Laredo)1 – More than 800 thousand containers by year in 2005 – Investments of Hutchinson Ports

Lázaro Cárdenas, Mich. (with exit by Nuevo Laredo)1 – New Installations for the reception of containers (2005) – 200,000 containers in the first year – 2 million containers in 10 years – Investment of Hutchinson Ports

Ensenada, BCN. (project)1 – Investment of Hutchinson estimated in 2 billion dollars. – Capacity for 6 million containers by year in the medium term.

Corridor from the Gulf to the Pacific2 Sources: •1. Research in the web pages of the ports and – Competition to the Panama Canal www.jornada.unam.mx/2005/03/07/secara.html – Connects Coatzacoalcos to Salina Cruz •2. Article published in www.elnorte.com – Corridor of 302 Km. – $1,500 million of pesos in 12 years – 550 thousand containers annually – Investment: Ferrosur, Hutchinson ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. OpportunityOpportunity forfor ““LaLa EntradaEntrada alal PacPacííficofico”” Corridor:Corridor: ReceiveReceive merchandisemerchandise fromfrom AsiaAsia withwith destinydestiny toto thethe easteast ofof thethe UnitedUnited StatesStates

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. Dallas / Fort Worth: The greater center of distribution and logistics of North America $49.6 thousand millions of dollars in international trade. 26% of the trade is with China. 68% of the trade is with Asian countries. 70% that arrives to Long Beach and Los Angeles is sent to Dallas/Ft. Worth. DFW COMERCIO INTERNACIONAL TOTAL 2001-2005 DFW COMERCIO INTERNACIONAL $49,601 2005 50000 $43,979 Otros China 25% 45000 28%

40000 $36,196 S

E $30,520 35000 $29,758

LAR Tailandia

DO 30000 3% E

D Reino Unido

ES 25000 3% Korea del Sur N

O Filipinas 10% 20000 3% MILL Alemania Japon 3% 15000 Malasia Singapur 7% Taiwan 6% 6% 10000 6%

5000 Source: 0 Greater Dallas Chamber 2001 2002 2003 2004 2005 Fuente: USA Trade Online

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. OpportunityOpportunity forfor MidlandMidland andand OdessaOdessa withwith thethe newnew corridorcorridor

•Midland and Odessa see the corridor as an alternative for economic diversification: to pass from an economy based on the petroleum to be become a center of distribution and logistic. •Competitive Advantages and location.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ¿¿WhatWhat areare ourour AdvantagesAdvantages??

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. CompetitiveCompetitive AdvantagesAdvantages

•Lower distance in 300 miles (Topolobampo- Dallas Vs. Long Beach- Dallas).

•Topolobampo Port: with development potential

Ferromex-Texas Pacífico & Connections •Frontier port strategically Area of Influence and Potential Market located and with potential for development.

•Railway from Topolobampo to Ojinaga.

TEXAS-PACIFICO TRANSPORTATION

FORT WORTH & WESTERN RAILROAD

MAYAB

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. EconomicEconomic andand SocialSocial ImpactImpact ofof thethe CorridorCorridor

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. 1.1. SocialSocial ImpactImpact

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe newnew roadroad willwill havehave anan enormousenormous socialsocial impactimpact

•Improve the quality of life of marginalized regions of the state. •Connection with the rest of the state. •Reduction on the price of products. •Economic development and social Impact in the municipalities of Urique and Guazapares, mainly.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. The municipalities of the “sierra” zone (mountains) have one the lowest welfare levels in the state and in the country

Level Optimum level

Extreme Poverty

TEMOSACHI GUERRERO MORIS OCAMPO URUACHI MAGUARICHICARICHI BOCOYNA CHINIPAS NONOAVA GUAZAPAREZ URIQU GUACHOCH E I BATOPILAS BALLEZA MORELO S GUADALUPE Y CALVO Population of 296,000 inhabitants

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. 2.2. EconomicEconomic ImpactImpact inin thethe ““sierrasierra”” zonezone

Mining and Tourism

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ImpactImpact inin thethe miningmining sector.sector. Development of currently operations and new investments, access to suppliers of

Monterde

Palmarejo

Piedras Verdes El Sauzal

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ImpactImpact onon TourismTourism

It will detonate new touristic projects from the “Barrancas del Cobre “ Project.

Synergy with the State of Sinaloa

Development of tourism from Chihuahua toward the coast of the Pacifico

New alternative of entrance to Chihuahua of tourists from Sinaloa by highway and from tourism cruisers.

The highway will permit the development of new potential tourist areas that lack an access by adequate ways

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. 3.3. ImpactImpact inin thethe EconomicEconomic DevelopmentDevelopment ofof thethe EntityEntity Industrial Development, trade, services in the zone central south of the State. Development of the port Ojinaga- Presidio.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ImpactImpact inin thethe regionalregional economyeconomy

Attraction of new investments projects: – Industrial – Transportation and Logistic – Complementary services for transportation – Trade and services – Generation of Jobs

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. The corridor “” presents a high impact in the central-south zone of the state: Industrial sector for export.

•Ojinaga-Presidio as an exit port of the industry from the central-south zone of the state to the USA market.

•Potential to receive industrial investments from Asia that at present are locating in Baja California.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. 4.4. InterInter--statestate tradetrade withwith SinaloaSinaloa

Farm products, cattlebreeding, tourism, industrial goods

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ForeseeableForeseeable impactimpact inin thethe industrialindustrial sectorsector ofof SinaloaSinaloa andand ChihuahuaChihuahua •Promotion of new industrial investments: maquiladora •Satellite operations along the corridor. •Sinaloa has a deficit in Milk.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. 5.5. InternationalInternational tradetrade

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe corridorcorridor willwill havehave anan impactimpact inin thethe growthgrowth ofof internationalinternational tradetrade byby thethe portport ofof OjinagaOjinaga--PresidioPresidio

From 49 trucks per day to:

– 550 in 2010 – 965 in 2015 – 1,455 in 2020

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. StrategicStrategic ActionsActions:: DevelopmentDevelopment andand constructionconstruction ofof highwayhighway sectionssections missingmissing inin thethe statesstates ofof ChihuahuaChihuahua andand SinaloaSinaloa

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ¿¿WhatWhat isis missingmissing inin thethe statesstates ofof ChihuahuaChihuahua andand Sinaloa?Sinaloa?

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. Unpaved section in the “Sierra Tarahumara” 153 Km. in Chihuahua and 49 Km. in Sinaloa

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. MISSING SECTION IN THE SIERRA

PROJECT CHARACTERISTICS: Lenght (Chihuahua State) 153 Km.

Lenght (Sinaloa State) 49 Km. Total Lenght 202 Km.

The Ministry of Communications and Transportation of Mexico has an executive project for highway type C.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. SectionsSections ofof thethe AldamaAldama--OjinagaOjinaga HighwayHighway ExpandExpand toto typetype AA--22 a) Section: Expand to 12.00 Mts. Aldama - Km. 84 Highway to Ojinaga Lenght = 51 Km.

b) Expand to 12.00 Mts. Km. 201 (Highway Camargo to Ojinaga) - Ojinaga AduaAdua Lenght : 45 Km. nana La La MuMulala Total Lenght = 96 Km.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ImproveImprove sectionssections fromfrom ChoixChoix toto LosLos MochisMochis

Improve the highway type C from to San Blas (in process).

Loop in the Highway San Blas- .

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ““SierraSierra dede ChihuahuaChihuahua”” Section:Section: TruckersTruckers OpinionOpinion It is required a highway to comply with globalized transportation standards: – 53 feet Containers. – Double tow for 40 ft. containers. The acceptable minimum highway is a type B. Building a highway that really will be used. Model of what do not must be done: Highway - Chihuahua Hermosillo.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. Type B Highway required for the section La Junta-Choix

9 meters of total wide 7 meters of roadway 1 meter of shoulder by each side Ascent rail in key sections

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ActualActual TrafficTraffic levelslevels andand projectionprojection inin thethe corridorcorridor

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. Crossing of trucks to the north*: 2,846 Ciudad Corssing of trucks to the south*: 1,276 Juárez Average Annual Daily 10,880 / 22% A Nogales, Son. A . Traffic (AADT) / % of load ttruckruckss anandd bbusesuses 20200505 1,983 / 15% Samalayuca 14,461 / 15% Janos 6,830 / 19% Imuris 3,422 / 18% Villa Ahumada Nuevo 11,151 / 23%

5,210 / 29% Crossing of trucks to the north*: 20 Benjamín Hill 323 / 25% (C.Cobro) Crossing of trucks to the south*: 29

9,108 / 23% Flores Magón OJINAGA El Sueco Carbo 2,783/ 23% 690 / 13% 440 / 12% 7,560 / 24% 11,307 / 25% 621 / 12% (C. Cobro) A Hermosillo, Son. 6,120 / 15% 7,330 / 17% Aldama Hermosillo 536 / 15% 4,820 / 20% Yecora CHIHUAHUA Cuauhtémoc La Junta 10,470 / 17% 1,021 / 15% 5,740 / 49% (C. Cobro) Delicias San Juanito 3,800 / 14% (V. Libre) Saucillo A Obregón, Son. (Cobro) 3,630 / 36% (C. Cobro) Camargo San Rafael 3,900 / 18% (V. Libre) 4,165 / 21% 3,580 / 50% (C. Cobro) 3,780 / 24% (V. Libre) Jiménez

5,020 / 21% (V. Libre) Choix 2,060 / 43% (C. Cobro) 1,205 / 23% El Fuerte To Torreón, Coah. 3,490 / 14% (Cobro) San Blas Sources: 5,882 / 21% 3,490 / 25% Datos Viales, S.C.T., 2005 Los Mochis ALDERETE Y SOCIOS TOPOLOBAMPO S.CONSULTC.O.PO.R StIA aINtDUSTRe GovernmentIAL, S.C. , 2005 * Texas Center for Border Economic Average Annual Daily Traffic (AADT) / % of load ttruckruckss anandd bbusesuses 20201010

Crossing of trucks by both sides: 549 OJINAGA

2,270, / 24% 7,949 / 30% 8,930 / 34% Aldama 6,734 / 40% CHIHUAHUA Cuauhtémoc La Junta 2,268 / 30% San Juanito

San Rafael

1,426 / 30%

Choix 2,444 / 40% El Fuerte

San Blas Source: Alderete y Socios estimations 7,209 / 42% Los Mochis ALDERETE Y SOCIOS TOPOLOBAMPO CONSULTORIA INDUSTRIAL, S.C. Average Annual Daily Traffic (AADT) / % of load ttruckruckss anandd bbusesuses 20201515

Crossing of trucks by both sides: 965 OJINAGA

3,236 / 30% 9,076 / 38% 10,159 / 43% Aldama 8,165 / 50% CHIHUAHUA Cuauhtémoc La Junta 2,926 / 38% San Juanito

San Rafael

1,997 / 38%

Choix 3,086 / 50% El Fuerte

San Blas Source: Alderete y Socios estimations 8,628 / 53% Los Mochis ALDERETE Y SOCIOS TOPOLOBAMPO CONSULTORIA INDUSTRIAL, S.C. Average Annual Daily Traffic (AADT) / % of load ttruckruckss anandd bbusesuses 20202020

Crossing of trucks by both sides: 1,455 OJINAGA

4,444 / 38% 10,316 / 47%

10,463 / 53% Aldama 9,825 / 63% CHIHUAHUA Cuauhtémoc La Junta 3,683 / 47% San Juanito

San Rafael

2,657 / 47%

Choix 3,822 / 63% El Fuerte

San Blas Source: Alderete y Socios estimations 10,248 / 66% Los Mochis ALDERETE Y SOCIOS TOPOLOBAMPO CONSULTORIA INDUSTRIAL, S.C. KeyKey issuesissues forfor thethe successucces ofof thethe CorridorCorridor ““LaLa EntradaEntrada alal PacPacííficofico””

Frontier Port of Ojinaga and Presidio Port of Topolobampo

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe portport ofof OjinagaOjinaga--PresidioPresidio REQUIRES improvements in the infrastructure and processes to be more competitive WEAKNESSES: – Lacking of road accesses – Lacking of relievers for truck traffic – Narrow mixed bridge – Limited installations in the mexican customs OPPORTUNITIES: – Geographic Location – Consolidate the export of vegetables and cattle of Chihuahua and Sinaloa.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ConclusionsConclusions

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe economiceconomic impactimpact willwill dependdepend inin thethe typetype ofof highwayhighway inin thethe missingmissing partpart ofof ChihuahuaChihuahua SierraSierra

•The project demands a minimum construction of a highway type B: – 3.5 meters of roadway by lane – 1 meter of shoulder by side – Ascent lanes in the curves – Total: 9 meters of total wide

•Minimum specification required for the promotion of commercial traffic

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. EstimationsEstimations ofof thethe economiceconomic impactimpact

ECONOMIC IMPACT ESTIMATION PROJECT: CHIHUAHUA STATE TRAFFIC INDICATORS 2005 2010 2015 2020 INTERNATIONAL CORRIDOR TRAFFIC TPDA 30 6 61 6 9 48 INTER-STATE TRAFFIC TPDA 84 0 1, 072 1, 368 CROSSINGS OJINAGA-PRESIDIO NORTH CROSSINGS 54 9 96 5 1 ,455

IMPACT INDICATORS EXPORTS LEVEL OJINAGA-PRESIDIO MM OF DLLS 1, 928 3,389 5,114 NEW TOURISTS TOURISTS 38, 288 48,867 62,368

NEW INVESTMENTS ACCUMULATED NEW INDUSTRIAL INVESTMENT MM OF DLLS 45 318 678 ACCUMULATED NEW MINING INVESTMENT MM OF DLLS 20 120 220 ACCUMULATED NEW TOTAL INVESTMENT MM OF DLLS 65 438 898

ECONOMIC IMPACT ANUAL INDUSTRIAL ECONOMIC IMPACT MM DLLS ANUALLY 11 76 163 LOGISTIC ACTIVITY ECONOMIC IMPACT MM DLLS ANUALLY 51 73 102 TOURISM ECONOMIC IMPACT MM DLLS ANUALLY 29 115 228 TOTAL ECONOMIC IMPACT (MM DLLS) MM DLLS ANUALLY 91 264 493

JOB GENERATION ESTIMATIONS ACCUMULATED DIRECT INDUSTRIAL EMPLOYMENTS EMPLOYMENTS 75 0 5,300 11,300 ACCUMULATED TRADE AND TOURISM EMPLOYMENTS EMPLOYMENTS 1, 350 9,540 20,340 TOTAL EMPLOYMENTS EMPLOYMENTS 2, 100 14,840 31,640 Estimation: Alderete y Socios Consultoria Industrial, S.C.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ToTo bebe aa truetrue multimodalmultimodal corridorcorridor thethe integrationintegration ofof thethe railroadrailroad andand thethe airair transportationtransportation willwill bebe requiredrequired

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. TheThe projectproject ““LaLa EntradaEntrada alal PacPacííficofico”” hashas economiceconomic andand socialsocial justificationjustification duedue toto thethe impactimpact inin developmentdevelopment ofof tradetrade andand regionalregional economiceconomic developmentdevelopment thatthat willwill bebe generatedgenerated inin Sinaloa,Sinaloa, ChihuahuaChihuahua andand Texas,Texas, asas wellwell asas byby thethe globalglobal impactimpact toto bebe createdcreated asas aa newnew internationalinternational economiceconomic corridorcorridor..

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. This project will have a historic significance, as it will permit the connection by highway of the states of Chihuahua and Sinaloa.

The project “La Entrada al Pacífico” will be a strong economic engine that will detonate economic development in the states of Chihuahua and Sinaloa.

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. NEXTNEXT STEPSSTEPS ANDAND RECOMMENDATIONSRECOMMENDATIONS 1 CONSOLIDATE THE COMMITTEE “LA ENTRADA AL PACIFICO” (CHIHUAHUA/ SINALOA/ TEXAS) 2. WORK TOWARDS A HIGHWAY TYPE B (LA JUNTA, CHIHUAHUA-CHOIX, SINALOA). ELABORATE EXECUTIVE PROJECTS 3. IMPLEMENT AN INTEGRAL STRATEGY FOR THE DEVELOPMENT OF THE OJINAGA-PRESIDIO POR OF ENTRY 4. IMPLEMENT AN INTEGRAL STRATEGY FOR THE DEVELOPMENT OF THE PORT TOPOLOBAMPO 5. PROMOTE THE GROWTH OF PRESENT TRAFFIC IN THE SECTION CHIHUAHUA-OJINAGA 6. PROMOTE THE MULTIMODAL CORRIDOR IN THE SHORT AND MEDIUM TERMS TOPOLOBAMPO – PRESIDIO (RAILROAD) PRESIDIO-MIDLAND-DALLAS (HIGHWAY)

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C. ““LALA ENTRADAENTRADA ALAL PACIFICOPACIFICO”” A strategic project for regional development

ALDERETE Y SOCIOS CONSULTORIA INDUSTRIAL, S.C.